Inevitability and Opportunity

The bitter reward for a hard-won competitive bidding delay came to fruition this January in the form of a 9.5 percent cut on a number of product categories, including diabetes supplies. But like Jason from “Friday the 13th,” competitive bidding is not dead, and continues to lurk in the shadows.

After three months of living in the new reality, providers are feeling the effects to varying degrees. By most accounts, oxygen suppliers have raised the most concerns, while diabetes providers have largely chosen a quieter path.

Frank Suess, president of Pharma Supply Inc., says the 9.5 percent cut has, in some cases, brought reimbursement for test strips to a lower level than some manufacturers’ prices. “The only way for diabetic providers to stay in business and make money is to use a less costly product,” says Suess.

Virtually all manufacturers acknowledge heavy price competition now and in the future.

Clay Stribling, an attorney with the health care group of Brown & Fortunato, agrees that cost concerns will likely drive providers to think hard about the products they carry. “I think there is going to be a lot of pressure on manufacturers during the next year or two to compete with each other for the HME business, because so many suppliers are going to have to be cost-conscious,” he says.

“I think a lot of providers are going to have to modify their practice of giving out high-end items under the Medicare allowable, and have to scale back to lower-end items under the Medicare allowable — just because the margins are not there to support them.”

Maureen Ursprung, director of national accounts for AgaMatrix’ WaveSense, points out that in good times and bad, lean operations and additional product lines are vital to survival. “A lot of providers are looking at consolidating and tightening their belt, and they should also be diversifying their product categories,” she says.

“If we can come in and offer a valuable marketing program, give providers the right tools and help with the reimbursement [cut] — we can make it a win-win situation.”

At Home Diagnostics Inc., Cathy Pereira reminds providers to pursue non-Medicare payers while always looking for ways to cut costs. “With the DME market, there are always going to be providers who are savvy with their business models, regardless of competitive bidding or the 9.5 percent cut,” says Pereira, national sales manager, DME mail/government relations.

“All DME providers should start to look at private payers. Our customers are looking for expanded reimbursement channels, and so are we.”

Edward Letko, managing director of US Diagnostics, supplies a lot of mail-order DMEs that focus on Medicare, but his company has lately made a concerted effort to make it easier for providers to bill insurance carriers successfully.

“We are getting our products on those formularies and diversifying from Medicare to look at other areas,” says Letko. “Private insurance has been a big focus for us.”

With vehicles such as Medicare Advantage plans, a lot of HME providers are beginning to recognize the opportunity to rely less on Medicare and diversify crucial reimbursement streams. Factor in the inevitable comorbidities associated with diabetes, and there is undeniable opportunity for retail ADLs and respiratory products.

“When you look at how sleep apnea has taken off over the last few years, that goes hand-in-hand with diabetic patients, and 8 to 10 percent of respiratory patients are also diabetes patients,” says Pereira. “There is a lot of additional business you can get by capturing that diabetic patient within your category.”

Medicare supplier standards require that patients be trained on diabetes products, but providers don’t have to do it alone.

“A manufacturer can offer a platform of education for the patient, and that is free of charge,” says Pereira. “We have educational brochures on healthy eating and clinical DVDs that talk about how to use a product — and a certified diabetes educator (CDE) team.

“DMEs should lean on manufacturers to provide educational resources and use them to meet those educational requirements,” she says.

Competitive Bidding Question

Despite a new administration and a new nominee to head HHS (at press time President Obama had nominated Kansas Gov. Kathleen Sebelius for the job), competitive bidding continues to roll on like a Part B horror movie. CMS’ interim final rule, which reprises the bid for Round One, has been delayed until April 18. Meanwhile, the deadline to comment on the IFR was set to close March 17.

While the home care industry may yet throw another monkey wrench at the process, CMS intends to implement Round One bidding this year, and intends to apply the same methodologies it used last time to calculate payments and select suppliers, the agency has said.

When Round One product categories were announced, CMS named mail-order diabetes supplies but left out in-store supplies. The IFR states CMS is pondering alternatives for the competition of diabetic supplies because of the issues related to differing payment rates established based on mode of delivery. The agency asked for comments on the matter.

A “hot button” memorandum from Cara Bachenheimer, senior vice president of government relations for Invacare, confirms “CMS believes it should employ competitive bidding for diabetic supplies in both the mail-order and traditional retail markets, in part due to concerns raised about the bifurcation of the method of delivery of diabetic supplies, and the difficulty in defining what constitutes ‘mail-order.’”

The diabetic products bid could possibly take place sometime after the Round One rebid, she writes.

Product categories for Round Two have not yet been announced.

“Then there is a big question mark in relation to what will happen in 2011. Is there a national competitive bid plan [for diabetes]?” wonders Pereira. “For home care providers, this is all somewhat of an unrest because they would like to know concretely: What is in CMS’ sites? Where are they going? What are they doing? And how soon are they going to do it?”

Despite the uncertainty, manufacturers and providers look at the growing diabetes epidemic and are confident that demand will remain strong. “Our customer base is optimistic. They are focusing on trying to maintain and build the patient base,” says Letko.

“Price cuts will affect the industry, but the lean guys will not go out of business. Nimble businesses without the high overhead will fare well.”

Documentation Matters

Stribling warns that many products have moved to the forefront of Medicare scrutiny, and the Office of Inspector General and Program Safeguard Contractors are looking closely at diabetic testing supplies. A new wave of audits has triggered interest in the appropriate claims procedures for meters, strips and lancets.

“Medicare has been very aggressive in auditing frequent testers, meaning those who test more than once a day if they are non-insulin-treated and more than three times a day if they are insulin-treated,” says Stribling. “If you have a patient out there testing four times a day, there is a whole new level of documentation required to provide to the carrier to support that claim versus a patient testing just one time a day.”

When in doubt, Stribling recommends consistent adherence to the basics. For home blood glucose monitors, that means Medicare coverage is granted when patients meet the following five criteria: 1) patients are diagnosed with and treated for diabetes; 2) physicians have ordered the monitor and related supplies; 3) patients have been provided training on the use of the equipment; 4) patients are capable of using the test results to control glucose levels; and 5) the blood glucose monitor provided is designed for use in the home.

Stribling says the challenge for providers is finding a way to differentiate themselves from their competition — and being the company that beneficiaries want to do business with. While this can be done through marketing, he cautions that the OIG is fed up with providers touting free products for items being billed to other payers.

“Avoid marketing to patients by indicating that the patients will receive an item for free when, in fact, Medicare is paying for the item,” says Stribling. “CMS also requires that suppliers attempt to collect their patient’s copayment.”

Smaller, Faster and More Comfortable

According to the , products like insulin pumps and glucose monitors have been improved and upgraded. Some products now store data, graph progress, send text alerts, calculate insulin doses and make it easier for physicians to monitor how patients are managing their disease.

Equipment for monitoring has never been more advanced. Several glucose monitors “speak” to patients, so following instructions and getting test results is easier. Combination devices allow a check of both blood glucose levels and blood pressure. And some systems can display continuous readings. Product sizes are smaller, and so are the sample sizes required.

With advanced technology, even some syringes and lancets now offer little discomfort or inconvenience.

Here’s a sample of only a few products on the market today that are making diabetes management less painful and more efficient. Check with your diabetes vendor to make sure you are up to date on the latest products; your patients will be asking for them soon.

The Numbers Add Up

Lending credence to a long list of studies showing a growing diabetes epidemic in America, the National Institutes of Health contributed its own data earlier this year, declaring that nearly 13 percent of adults over 20 have diabetes. According to epidemiologists from the NIH and the Centers for Disease Control and Prevention, however, a whopping 40 percent of them have not yet been diagnosed.

If these numbers are accurate, demand will not be an issue in years to come. Consider that the NIH confirmed diabetes is especially prevalent in adults over age 65, with nearly one-third of this age group harboring the disease. Researchers found an additional 30 percent of adults have pre-diabetes, a condition characterized by elevated blood sugar that is not yet in diabetic range.

The study compared the results of two national surveys that included a fasting blood glucose test and a two-hour reading from an oral glucose tolerance test (OGTT).

“We’re facing a diabetes epidemic that shows no signs of abating, judging from the number of individuals with pre-diabetes,” said lead study author Catherine Cowie, PhD, of the National Institute of Diabetes and Digestive and Kidney Diseases, a part of NIH.

“For years, diabetes prevalence estimates have been based mainly on data that included a fasting glucose test but not an OGTT … The addition of the OGTT gives us greater confidence that we’re seeing the true burden of diabetes and pre-diabetes in a representative sample of the U.S. population.”

Researchers also relayed the following results:

• The rate of diagnosed diabetes increased between the surveys, but the prevalence of undiagnosed diabetes and pre-diabetes remained relatively stable.
• Minority groups continue to bear a disproportionate burden. The prevalence of diabetes, both diagnosed and undiagnosed, in non-Hispanic blacks and Mexican-Americans is about 70 to 80 percent higher than that of non-Hispanic whites.
• Diabetes prevalence was virtually the same in men and women, as was the proportion of undiagnosed cases.
• Pre-diabetes is more common in men than in women (36 percent compared to 23 percent).
• Diabetes is rare in youth ages 12 to 19 years, but about 16 percent have pre-diabetes.

Another way to objectively analyze demand is to look at the increasing utilization of the A4253 code, which is the designation for a 50-count box of test strips.

“That reimbursement has risen anywhere between 4 to 6 percent over the last three years,” explains Home Diagnostics’ Cathy Pereira. “That tells you that the patient population is increasing … The American Diabetes Association estimates that 24 million people are walking around with diabetes — that is 8 percent of the population, and that is huge.

“For diabetes, pre-onset, type 1 and type 2, there is a lot of opportunity for DME providers,” she says.

Experts Interviewed

Cara Bachenheimer, senior vice president of government relations, Invacare Corp., Elyria, Ohio; Edward Letko, managing director, US Diagnostics, New York, N.Y.; Cathy Pereira, national sales manager, DME mail/government relations, Home Diagnostics Inc., Fort Lauderdale, Fla.; Clay Stribling, Health Care Group, Brown & Fortunato, Amarillo, Texas; Frank Suess, president, , West Palm Beach, Fla.; and Maureen Ursprung, director of national accounts, WaveSense, AgaMatrix, Salem, N.H.